Federal Direct Loans

BPCC participates exclusively in the William D. Ford Federal Direct Loan program, in which borrowers obtain loan funds directly from the U.S. Department of Education.

On March 25, 2010, the U.S. House of Representatives and the U.S. Senate passed The Health Care and Education Affordability Reconciliation Act of 2010 ("HCEARA"-H.R. 4872) . This bill makes major changes in several federal student aid programs AND mandates that, effective July 1, 2010, all federal student loans (Direct, PLUS, and Grad PLUS) will be originated through the Federal Direct Loan Program.

What do you need to do?

All student borrowers will need to complete a Master Promissory Note (MPN), with the Department of Education (even if you have completed an MPN in the past with a private lender).

Many students rely on federal government loans to finance their educations. These loans have low interest rates and do not require credit checks or collateral. The federal loan for students is called the Direct Loan and is administered under the William D. Ford Federal Direct Loan program.

Direct loans are available for students meeting certain qualifications. If you are considered a regular student enrolled in an eligible program at least six hours, and you meet all other eligibility requirements such as Satisfactory Academic Progress, you may qualify for a Federal Direct Loan. You must meet all other eligibility requirements

Students are automatically packaged for student loans. An award notification will be sent via email instructing the student to view the awards via LOLA. All students are offered the maximum loan eligibility.

It is the student’s responsibility to accept or decline all or a portion of the loan, via LOLA. Once student has accepted the loan, the school sends an electronic origination file to the Department of Education notifying the Department of the student borrower’s loan eligibility, the loan period, and the anticipated disbursement dates. The Department responds electronically with an accepted or rejected record, based upon the student’s completion of other required documents (Master Promissory Note and Entrance Counseling).

Before disbursing loan funds, BPCC must first make sure that the student is eligible to receive them. The College must also ensure that the student has maintained continuous eligibility before the loan is disbursed. The most common change that would make a student ineligible for a Direct or PLUS disbursement is if the student has dropped below half-time (6 hours). The Financial Aid Office has a process (certification process) to check the student’s enrollment status (and other eligibility requirements) at the time of disbursement. If the student is deemed ineligible to receive the loan disbursement, the loan funds are cancelled.

If a student is in the first year of an undergraduate program and is a first-time Direct Loan borrower, BPCC may not disburse the first installment of the Direct loan until 30 calendar days after the student’s program of study begins (1st day of class).

If there is more than one term in the loan period, the loan will be disbursed over all terms of the loan period. For example, if a loan period includes two semesters (fall and spring) of an academic year, the loan will be disbursed in two substantially equal disbursements, one at the beginning of loan period, and the second disbursement at the mid-point of the loan period (beginning of the second semester).

If there is only one term in the loan period (example: fall only) the loan must be disbursed in equal amounts at the beginning of the term and at the term’s calendar midpoint (mid-term).

Loan Fees

The U.S. Department of Education will charge a loan origination fee for processing your loan.

2013-2014: Loans first disbursed between July 1, 2013 and December 1, 2013 will be charged a 1.051% origination fee.

2013-2014: Loans first disbursed after December 1, 2013 will be charged a 1.072% origination fee.

2013-2014: Parent PLUS loans first disbursed after December 1, 2013 will be charged a 4.288% origination fee.
The loan fee/origination fee is subtracted proportionately from each loan disbursement.

Types of Federal Direct Loans

Federal Subsidized Student Loan (SUB)

A subsidized loan is awarded on the basis of financial need.

The federal government pays the interest on the loan (subsidizes the loan) while the borrower is enrolled at least half-time and during the repayment grace period.

Students must begin repaying this loan 6 months after you cease to be enrolled at least half-time. Information about Direct Loan interest rates may be found at www.studentloans.gov.

Federal Unsubsidized Student Loan (UNSUB)

The unsubsidized loan is not based on financial need.

The federal government does not pay the interest while the borrower is in school. All interest is the borrower's responsibility. You will be charged interest from the time the loan is disbursed until it is paid in full. Students can either pay the interest while they are in school or let it accrue. If it is not paid, it is added to the principle (capitalized) when the borrower goes into repayment. If your interest is capitalized, it will increase the amount you have to repay. You can choose to pay the interest as it accumulates; if so, you'll repay less in the long run.

Students must begin repaying this loan 6 months after you cease to be enrolled at least half-time. Information about Direct Loan interest rates may be found at www.studentloans.gov.

Federal Parent Loan for Undergraduate Student (PLUS)

The PLUS loan is not need-based. Financial aid resources are subtracted from the student’s cost of attendance. The parent of a dependent student may borrow the remaining amount. There is no annual limit, nor is the EFC considered in PLUS eligibility. The parent should apply online at www.studentloans.gov.MORE»

Parents: When you apply for a Direct PLUS Loan, the Department of Education will check your credit history. To be eligible for a PLUS Loan, you must not have an adverse credit history. If you are found to have an adverse credit history, you may still borrow a PLUS Loan if you get an endorser who does not have an adverse credit history. An endorser is someone who agrees to repay the Direct PLUS Loan if you do not repay the loan. The endorser may not be the student on whose behalf a parent obtains a Direct PLUS Loan.

The Department of Education will notify the school of the results of the credit check (approved or denied). If approved, the PLUS loan is submitted electronically to the Department of Education. If the credit check results in a denial, the student may be eligible for additional UNSUB loan. If so, the student’s loan awards will be adjusted. A new award notification will be sent via email and the student will need to access LOLA to accept the additional loan funds.

Loan Limits

Annual Loan Limits for Subsidized and Unsubsidized Direct Loans

These amounts are the maximum yearly amounts you can borrow in both subsidized and unsubsidized FFEL loans, individually or in combination. Because you cannot borrow more than your cost of attendance minus the amount of any Federal Pell Grant you are eligible for and minus any other financial aid you will receive, you may receive less than the annual maximum amounts.

You may receive a subsidized loan and an unsubsidized loan for the same enrollment period as long as you don't exceed the annual loan limits.

Effective July 1, 2008:

If you are a dependent undergraduate student, with sufficient eligibility, each year you may borrow up to:

$5,500 if you're a first-year student
(no more than $3,500 of this amount may be in subsidized loans)

$6,500 if you are a sophomore (earned 30 hrs or more)
(no more than $4,500 of this amount may be in subsidized loans).

$9,500 if you are a freshman
(no more than $3,500 of this amount may be in subsidized loans)
$10,500 if you are a sophomore (earned 30 hours or more).

(no more than $4,500 of this amount may be in subsidized loans)

Lifetime Loan Limits for Subsidized and Unsubsidized Direct Loans

Undergraduate Dependent Student - $31,500
(no more than $23,000 of this amount may be in subsidized loans)

Undergraduate Independent Student - $57,500
(no more than $23,000 of this amount may be in subsidized loans)

Counseling Sessions

Entrance Counseling Session. Before you receive your Direct Loan, the federal government requires that you understand the basics of borrowing.

Exit Counseling Session. Before you begin repaying your Direct Loan(s), the federal government requires that you understand the basics of repayment.

Repaying your Student Loan Debt

After you graduate, leave school, or drop below half-time enrollment, you will need to complete a Direct Loan Exit Interview. You will then receive information about repayment and your loan servicer will notify you of the date your loan repayment begins. We cannot emphasize enough the importance of making your full loan payment on time either monthly (which is the usual pay cycle) or according to your repayment schedule. If you do not make your regular payments, you could end up in default, which has serious consequences. Student loans are real loans—just as real as car loans or mortgages. You must pay back your student loans.

Each type of loan has its own requirements regarding grace periods (amount of time until your first payment), repayment options, and repayment periods:

Federal Direct Loans

You have a grace period of six months until your first payment must be received for your Federal Direct Loan.

Repayment Information from the Department of Education explains available repayment options for Direct Loans, includes examples of monthly payments for different loan amounts, and covers other topics you need to consider when managing your loans. Use the Student Loan Calculator to calculate your monthly payments and compare them to your expected starting salary.

Income Based Repayment is a new repayment plan for the major types of federal loans made to students including Direct, Grad PLUS, and some Consolidation loans. Under IBR, your required monthly payment is capped at an amount that is intended to be affordable based on your income and family size.

Your monthly payment will depend on the size of your loans and the length of your repayment period.

Federal PLUS Loans

The repayment period for all PLUS loans begins on the date the loan is fully disbursed, and the first payment is due within 60 days of the final disbursement.

Parent PLUS loan borrowers may choose to have repayment deferred while the student for whom the parent borrowed is enrolled at least half-time and for an additional six months after that student is no longer enrolled at least half-time.